Mercaforex, Wall Street Could Rule The Day

USD:
The USD lost a touch of ground to the major currencies on Monday but this occurred as light volume was dominant. Yesterday was a banking holiday in the States and all the major markets and financial institutions were closed. Today the TIC Long Term Purchases data will be released and the estimate is for 30.3 billion, but investors typically do not use this data as a lynchpin. What could very well take place today is that the equity markets will be the driving impetus within the trading ‘machine’, this as investors return from their long weekend and try to weigh their sentiment after Friday’s tough day. Quarterly earnings will come from IBM, Citigroup, and CSX among others and this could be enough to set the tone going into tomorrow when Building Permits and Housing Starts data will be brought forth.

In many respects Wednesday may prove the critical day of trading for the marketplace this week and either sustain or change the existing short term sentiment. Also of interest today will be the rather important election in the U.S. from the Commonwealth of Massachusetts for the vacant Senate seat. Investors will watch the outcome from this election carefully and if a clear result exist by this time tomorrow it could prove rather interesting as a looking glass into the next nine months regarding how health care and the federal budget debate will be carried forth. In other words if a Republican is elected we might see a call for a more fiscal conservative approach for the American economy. However, a Republican victory would be considered an upset, but one that looks possible now. Politics aside, the stock markets coupled with tomorrow’s data should be enough to make the next two days important. The USD showed some strength going into last weekend and yesterday – because of the holiday, may have not been a proper barometer for what will take place today.

EUR:
On very little economic data from Europe and no action from across the Atlantic the EUR gained against the USD. Yesterday’s market, however, may not be able to be considered an accurate reflection of trend due to the banking holiday in America. Today the German ZEW Economic Sentiment reading will be published along with the broad European numbers from ZEW too. Today’s forecast from Germany is 49.8 and this is below last month’s outcome. These numbers highlight what has become a loud murmur recently among analysts who believe that Germany might be about to enter a so-called ‘double dip’ recession. Having said that the fact that Germany and others proclaimed that they had left the recession behind has been always met with a hint of skepticism. Also taking place today is a meeting in Brussels with European Union officials who are expected to tell Greece publically that they have to get their budget deficit in order. While investors know the details and problems of Greece well, what they are worried about are other European nations falling prey to poor spending policies. Traders must remember that the EUR is still at a rather high value against the USD even though it has shown some weakness the past month.

GBP:
The Sterling like the EUR was able to gain against the USD on Monday and there was no major economic data. Today and tomorrow however there will important reports. Inflation data and the Bank of England’s Inflation Letter will be brought forth. Investors will be on the lookout for any surprises. Tomorrow the Claimant Count Change and the MPC Meeting Minutes will be released. These figures and text should be enough to stir the minds of GBP traders who have seen the Sterling climb in value the past week and regain some of its footing against the greenback. Like the USD, the next two trading sessions for the GBP could prove to be the apex of the week and create swift movements as trends get tested.

JPY:
The JPY has traded stronger against the USD for the past few sessions and this is probably a result of risk adverse sentiment coming into the Asian bourses. The JAL, Japanese Airlines, story has been known for a while, but as of today the company appears ready to announce officially that it will be undergoing a major restructuring including bankruptcy. Gold has range traded the past couple of sessions and appears to be waiting on the impetus that is almost certain to come today and tomorrow as risk sentiment is evaluated.

Will The Price OF Gold Continue Rising?

XAU/USD:
The Gold 1 Hour Chart illustrates some very interesting trading for Gold in the past 2-3 hours. The latest 2 candles on the chart show that the bulls have outpaced the bears. In a 2 hour timeframe alone, the commodity has gained near $5. This is likely to catch much attention from professional forex traders. What’s more, is that I feel that there is a possibility that if this continues for 1-3 more candles on the chart, then this may ignite a short-medium term bullish trend. However, when looking at the chart as a whole, we have seen behavior like this previously, where the subsequent candles were bearish. In addition, the large price shifts in Gold may be due to the Martin Luther King Day holiday in the U.S. yesterday. Therefore, it may be a wise choice to employ much caution to trading today, as the markets still attempt to get back to normal. The most recent support levels are $1,126.45, $1,128.78, $1,131.20, and $1,134.93, and the current resistance levels are $1,143.69, $1,144.15 and $1,145.92. A failure to hit the $1,143.69 support level in the coming 2 trading days may have serious consequences with regards to the price of Gold in the medium-term future!

EUR/USD:
Since the commencement of trading yesterday morning, the EUR/USD pair has risen and stabilized around the $1.4408 level. This is despite a few glimpses on the way. The possible advantage of this sort of trading behavior is that it shows that the price of the pair is relatively stable, according to the EUR/USD 4 Hour Chart. On the other hand, conversely, when a set of candles often shows large price swings either way, it usually singles a lack of direction of the forex market and the relevant currency pair! Despite the recent bullish run of the EUR.USD currency cross about 5 trading days ago, the pair was trading near the $1.4600 level. What does this mean? This means that the pair has a lot of bullishness to record in order to reach this previous level. The chances of this may be potentially be greater in the coming trading days, due to market liquidity returning back to normal, as the month comes to an end. The support levels are $1.4334 and $1.4364, and the resistance levels are $1.4521 and $1.4556.

GBP/USD:
The GBP/USD Daily Chart shows that in the past week-week-and-a-half of trading, the GBP/USD currency cross has recorded much bullishness. In this period, the pair has risen from around $1.5900 to the current price level of $1.6419 Thus an fx trader that bought at the former price and sold at the latter price probably has a very big smile right now! The fact that large financial institutions around the world bet very heavily on this pair to go bullish may have lent significant support to the current bullish trend. But, it may not be completely accurate just to mention this one reason for the latest trend. I think that if we look at the chart more carefully, prior to the current bullish trend, the pair was heavily sold off, so the current market behavior for the pair may be a short-term correction. The support levels lie at $1.5832 and $1.5895, and the resistance levels are at $1.6602 and $1.6724.

USD/JPY:
The USD/JPY currency cross has gone increasingly bearish in the past week-and-a-half of trading. According to the USD/JPY Daily Chart, the pair has declined from a recent high of about 93.70 Yen to the current market price of 90.53 Yen. Those fx traders that opened buy positions at the former price are probably very frustrated at the moment! On the other hand, forex traders that sold the pair at the former level are counting their profits right now! If we look at the bigger picture, the chart shows that at the end of December, the pair did dip to around the 85.00 Yen level. Therefore, it is unfair to discount the validity of the current market price and the recent bearish trend. However, with market liquidity returning back to normal, I feel that a turn of events for this pair is never too far round the corner! The support levels are at 88.29 Yen, 88.89 Yen and 89.63 Yen, and the resistance levels are 92.00 Yen, 93.17 Yen and 93.71 Yen.